Despite sanctions , there will always be someone willing to trade with Iran if the terms are right....

http://online.wsj.com/article/SB10001424052702303299604577323601794862004.html

As Western sanctions on Iran have grown tighter, some small banks have found a lucrative niche financing what remains of the legal trade with the Islamic Republic.

As Western sanctions on Iran have grown tighter, some small banks have found a lucrative niche financing what remains of the legal trade with the Islamic Republic, Margaret Coker reports on Markets Hub. Photo: Reuters.

Top-tier financial institutions includingSociété Générale SA GLE.FR -2.35% and Rabobank Group have stepped back from business with Iran in recent months, citing increased political risk and logistical hassles that attend even legal trade with the country.

As a result, the remaining players are commanding higher fees and offering increasingly complicated services. Like Russia's First Czech-Russian Bank LLC and China's Bank of Kunlun Co. Ltd, they are typically small, obscure financial institutions often based in countries historically friendly to Iran.

The firms and other intermediaries still brokering these trades are charging more than 6% per transaction for legitimate trade deals with Iran, on top of traditional banking fees, according to traders and bankers knowledgeable with the process.

That is as much as triple the fees typically charged by Arab Gulf banks two years ago, before the United States and European Union significantly stiffened sanctions, according to Iranian businessmen.

Enlarge Image

Agence France-Presse/Getty Images

Trucks queue for inspection of goods coming from Iran through Al-Shib Port, a land entry point which handles around 150 trucks per day mostly carrying cement and tiles into Iraq from Iran.

"Companies still willing to facilitate Iran's global business are charging hefty fees to do so," says Trevor Houser, a partner at New York-based economic research firm Rhodium Group. "And those fees hit Iranians much more than their foreign customers or suppliers."

EU exports to Iran totaled around €10.4 billion ($13.6 billion) in 2011. In 2010, Iranian trade with China was estimated at €16.9 billion.

While relatively small, the markets are large enough to attract smaller institutions. In February, some traders started flocking to First Czech-Russian Bank after word spread that it had started servicing Iran trade facilities, according to Iran trade professionals. In March, Roman Popov, the chairman and majority owner of the bank, was elected to lead the Russian-Iranian Business Council, promising to increase bilateral trade.

In Geneva, Hinduja Bank (Switzerland) Ltd., handles Iranian food transactions for Swiss companies. Achille Deodato, a manager for group and business control, said the bank remains involved "with the authorization of Swiss authorities" in trade involving letters of credit and "bulk agricultural commodities."

Even in countries with historic ties to Iran, the subject is touchy. A spokeswoman for First Czech-Russian Bank declined to discuss the group's Iran business. Bank of Kunlun didn't respond to requests for comment, and a representative at state-owned China National Petroleum Corp., which controls Bank of Kunlun, said he was unaware of the matter.

Other institutions involved in financing legitimate trade with Iran declined to speak on the record, saying they feared publicity could lead the U.S. Treasury to increase its scrutiny of their U.S.-dollar operations.

"Legal or illegal, it doesn't matter. It's now political. Nobody wants a headache, and Iranian business is now a headache," said a Gulf official working on Iran policy.

Until recently, trade with Iran was still straightforward. Businesses signed deals with Iranian counterparts, used Iranian banks to clear payments, and could readily convert rials into euros, dollars or pounds.

But between late December and January, the U.S. and EU enacted a barrage of sanctions designed to increase pressure on Iran to change its nuclear policies. The new restrictions include a ban on the Iranian central bank, which had been the clearing house for all oil deals, and bars two dozen Iranian banks from the international bank-transfer system.

In Iran, a trio of small, private banks—Saman Bank, Karafarin Bank and Pasargad Bank—have stepped in to replace the larger, sanctioned institutions. The banks didn't return requests for comment.

On both sides of the border, there is demand for financial services. Medicine, food and other goods considered essential for Iranians' daily welfare are exempt from U.S. sanctions. The EU will join the U.S. this summer in prohibiting oil imports from Iran, but energy sales aren't sanctioned by U.N. rules, which China and Russia follow.

The changing rules have raised new questions about what deals are profitable—or even possible—without normal banking channels. Businesses that violate U.S. sanctions against Iran could be cut off from American markets and face legal action against their U.S. subsidiaries.

In response, Rabobank and Société Générale say they have stopped servicing Iran deals or curbed their trade finance. According to Iranian trade professionals, Korea's Woori Bank and Industrial Bank of Korea have done the same. The Korean banks could not be reached for comment.

Many Arab Gulf banks have also frozen their long-standing relationship with Iran, according to Arabian officials and bankers. In the last several weeks, the central banks of the United Arab Emirates and Qatar have told the institutions they regulate to stop financing Iranian trade deals, regardless of the nature of the contract.

The effects have been chilling. The rising costs of doing business with Iran have forced long-standing regional suppliers out of business, according to DF Deutsche Forfait AG,DE6.XE +3.02% which provides financial services for EU companies trading with Iran. An official at the company said that some German exporters of medical equipment have recently had to cancel trades with Iran after being unable to find banks to service them.

With the new restrictions, trading partners have turned to esoteric finance mechanisms that sidestep normal banking channels.

One method, a "money exchange," requires Iranian buyers to pay for foreign goods at a bank in Tehran, while the seller gets paid an equivalent amount at a bank abroad. A middleman balances the transaction between the banks.

Another avenue to service Iran deals is "forfaiting," in which a third party buys a letter of credit from an exporter and takes responsibility for recovering payment from the importer.

DF Deutsche Forfait started such services for Iranian trade in 2000 and says it is still active in this market. The company said in an email that it would work with clients as long as none of the parties are under sanctions and they are dealing in legitimate goods.

The firm declined to comment on the cost of such a service, but a person familiar with the matter said it typically charges 6% to 8% for Iranian transactions.

and....

Armenia to import Iranian oil products

April 09, 2012 | 12:06 

Armenia has shown an interest toward importing oil products from Iran, said Jalil Salari, the Managing Director of National Iranian Oil Products Distribution Company.

He noted that importing oil products from Georgia is not economically viable for Armenia, and therefore the latter has commenced importing such products from Iran.  

Salari also informed that in the first phase Iran’s private sector will export oil products to Armenia via motorways, and, subsequently, this will continue via pipelines, RFE/RL informs.          

The Iranian and Armenian energy ministries signed a respective agreement in February. And in line with this accord, Iran will export to Armenia gasoline, and diesel and aviation fuel.

Iran has started work on its section of a pipeline that would stretch from the South Pars gas field in the Persian Gulf to Pakistan. Both sides have expressed interest in the project, though Washington has stated opposition given the potential economic benefits for Iran.

India was included in the project but backed away after securing nuclear energy assurances from the United States. A senior Indian diplomat told the International News Network in Pakistan that New Delhi never fully walked away.

"It was just gone down on the priority list mainly due to security concerns in Pakistan," the source was quoted as saying. "We are an energy-deficient country and to sustain our high growth rate and ensure energy security, we need energy from every possible source."

The United States backs a rival project that would stretch from Turkmenistan to India through Afghanistan and Pakistan. Security concerns in Afghanistan, however, weigh on that project's development.

The source, who spoke on condition of anonymity, said Indian Prime Minister Manmohan Singh was expected to discuss the Iranian natural gas pipeline with Pakistani President Asif Ali Zardari "in the near future."

and....

NEW DELHI, April 9 (UPI) -- India is running an energy deficit and may consider rejoining a natural gas pipeline project from Iran, a senior diplomat said.
Iran has started work on its section of a pipeline that would stretch from the South Pars gas field in the Persian Gulf to Pakistan. Both sides have expressed interest in the project, though Washington has stated opposition given the potential economic benefits for Iran.
India was included in the project but backed away after securing nuclear energy assurances from the United States. A senior Indian diplomat told the International News Network in Pakistan that New Delhi never fully walked away.
"It was just gone down on the priority list mainly due to security concerns in Pakistan," the source was quoted as saying. "We are an energy-deficient country and to sustain our high growth rate and ensure energy security, we need energy from every possible source."
The United States backs a rival project that would stretch from Turkmenistan to India through Afghanistan and Pakistan. Security concerns in Afghanistan, however, weigh on that project's development.
The source, who spoke on condition of anonymity, said Indian Prime Minister Manmohan Singh was expected to discuss the Iranian natural gas pipeline with Pakistani President Asif Ali Zardari "in the near future."

Read more: http://www.upi.com/Business_News/Energy-Resources/2012/04/09/India-considering-return-to-Iranian-gas/UPI-26251333973443/#ixzz1rdsECYij